Reinventing the mall: It's no longer just about buying 'stuff'

With apologies to Mark Twain, reports of the death of the shopping mall are greatly exaggerated.

At least they are for Greater Des Moines malls.

Less than a year ago, key analysts were calling the traditional American shopping mall an endangered species. “Death of the shopping mall” headlines were further fueled by a 2012 forecast in which Green Street Advisors, a California analysis firm that tracks REITs (real estate investment trusts), predicted that 10 percent of the roughly 1,000 large malls in the U.S. will fail within the next 10 years.

Two key trends were blamed: 1. Americans, after curbing shopping urges during the Great Recession, weren’t coming back to malls. 2. Online shopping was steadily undercutting business for bricks-and-mortar stores.

In Greater Des Moines, Southridge Mall had been struggling for some years and Merle Hay Mall, the state’s oldest regional shopping mall, was also at risk. Today, however, a local expert who annually compiles a market report on area shopping centers says there’s good reason for optimism.

Tyler Dingel, a vice president at CBRE/Hubbell Commercial in West Des Moines, said bricks-and-mortar stores must focus on customer service, and be places where people can try products, such as getting the feel of various electronic gadgets at the Apple Store or Best Buy. If shoppers search for a product on their smartphone, find it on sale at a nearby store where they can receive good service, try out the product and pay a competitive price for it, the local store can ring up a sale, he said

“I think most consumers are starting to go back to those habits, go back to specialty stores,” Dingel said. “I don’t think local malls will be replaced.”

But as a survival tactic, malls nationally and locally are changing their purpose and their image. They must become more than a place to buy stuff, goes the current wisdom. They must become entertainment or social destinations as well. Shopping is coupled with entertainment, such as catching a movie, having a massage or eating at a sit-down restaurant.

“The reuse of retail strip centers or malls is an ongoing trend and is market-driven,” said Thomas Walsh, senior vice president for leasing at Abbell Associates LLC, which manages and leases Merle Hay Mall. “Many areas are overbuilt with shopping centers, and those centers that are physically obsolete or are no longer competitive in the retail marketplace must find a new use.”

Two of the oldest malls in Greater Des Moines have planned multimillion-dollar renovations aimed at bringing more people and more sales to the venues.

Southridge Mall last month opened the Des Moines Area Community College Center for Career and Professional Development, a $13 million project that transformed 65,000 square feet of the former J.C. Penney anchor store into a cutting-edge facility housing academic and technical programs. The mall has also added the Ice Ridge, a synthetic ice skating rink open to public skating, classes and parties. The goal: get more traffic into the mall in hopes that students and skaters will also spend money at restaurants and shops.
Also last month, at Merle Hay Mall crews demolished a parking structure on the south side of the shopping center to create a new mall entrance visible from Douglas Avenue. The news entrance will lead into a renovated area featuring new tenant Flix Brewhouse, a first-run movie theater with eight screens, dining and a microbrewery. Work to renovate space for Flix, improve the exterior of the northwest Des Moines shopping center and spruce up interior flooring and columns will total $18 million by the time it wraps up.

“At the end of the day, what we will have is increased and more balanced traffic throughout the mall,” Walsh said.

Here is status report for Greater Des Moines’ four major indoor malls.

Since Jordan Creek Town Center opened in August 2004, Iowa’s largest shopping center has spurred housing and retail development in the Dallas County portion of West Des Moines. Tyler Dingel, a vice president at CBRE/Hubbell Commercial, said Jordan Creek has been a top performer since it came on the market.

“I look at Jordan Creek as more of a regional attraction,” he said. “It pulls from 100-plus miles away. They have a lot of retailers you can’t find anyplace else in the state. I think they’re doing very well. I don’t foresee a lot of big changes there.”

The Scheels All Sports at Jordan Creek – which sells hunting and camping gear, sports equipment and apparel and clothing - has the second largest sales volume of any of the chain’s stores, Dingel noted.

The West Des Moines mall was built as a “lifestyle center,” featuring a 20-screen movie theater as an anchor and a lake district that’s ringed by popular restaurants and hosts summer concerts, visits by Santa Claus and other events. The lake and outlying mall property is surrounded by groups of retailers such as Old Navy, Ulta and DSW.

Merle Hay’s owners and businesses were fortunate that the addition of Target and renovating the Merle Hay Road exposure were completed just prior to the recession hitting in full force, Walsh said.

“While we certainly had tenants that were adversely affected by the economic downturn, new retailers like Target, Ulta Cosmetics, Staples and Shoe Carnival were great additions to the mall,” he said. “They balanced our merchandising mix, providing value shopping options at a high level. Additionally, an anchor like Target increases the frequency of shopping trips to a regional mall, from monthly or quarterly needs, to daily and weekly needs shopping. These factors had a positive effect on our mall sales during the recession.”

Now the mall is working on a third redevelopment phase, which is geared around its new major tenant - Flix Brewhouse, a movie theater with eight screens, dining and a microbrewery. The mall is renovating its signature two-level center court to feature Flix, and last month knocked down the parking garage on the north side of the mall so that traffic along Douglas Avenue sees what will be a new entrance to that entertainment area of the mall.

Walsh said he’s confident that Flix – with its mix of craft beers, sit-down eating in a space designed to allow wait staff to maneuver without blocking the view of the screen, and first-run movies – will draw customers to Merle Hay Mall from around Central Iowa.

“Flix is the only company that has incorporated a microbrewery into the cinema eatery concept,” Walsh said. “Their mixing kettles will be located at the closest mall entrance, behind glass, where people can view them as they enter the mall. This is an exciting departure from the typical popcorn palaces, and it will be the first of its kind in the state.”

“I applaud them for the theater concept they’re bringing in,” Dingel said. “I’m not 100 percent convinced we have the demand to support it at this location, but I hope they’re successful.”

He also praises Merle Hay’s owners for taking an area that has been deemed the back side of the mall and was not noticed by people and creating something new with the remodeled entrance to Flix.

“There has been a shift in thinking in the industry relative to non-retail uses,” Walsh said. “In the old days, theaters, restaurants and other non-retail uses were relegated to the back of the mall or the ring roads outside the mall. Now, the traffic that is generated by many of these uses is an attractive addition to the mix.”

When Flix opens in June 2014, the single-screen Merle Hay Cinema will close. Walsh is already looking for a business to take over the space, suggesting maybe a performing arts or family friendly venture like the Sky Zone Indoor Trampoline Park in Grimes would make good use of the high ceilings and open interior.

He’s also looking to attract a local destination restaurant such as Zombie Burger + Drink Lab or a Jethro’s BBQ. “These and other strong locals are exactly the interesting type of operators we’d like to invest in at Merle Hay,” Walsh said.

The decision to turn retail space into other uses by Southridge’s owners, especially the recent opening of the DMACC center “has probably helped save that mall,” said Dingel. Changes at Southridge have created consistent traffic to the mall through DMACC, the soccer complex and an ice rink.Mall managers decided to sell the former J.C. Penney store to Des Moines Area Community College (DMACC) for $1, and last month, the school opened the Des Moines Area Community College Center for Career and Professional Development in the renovated space.“That drives traffic every single weekend,” Dingel said of the new amenities. “If you are at DMACC for a class and have a break, you’re going to wander and get something at those shops. Those retailers really have a captive audience.”
That’s quite a different view than just four years ago when Southridge was listed in one national magazine as one of the country’s malls likely to fail.Southridge’s occupancy rate was not listed in the CBRE/Hubbell Commercial 2013 market survey, but in 2009 Green Street Advisors analyzed mall occupancy rates as the recession was hastening the closure of malls across the country. According to U.S. News and World Report, the firm gave Southridge a grade of C- or D for its occupancy rate, which was then 84 percent. An occupancy rate of 92 percent is considered good for an A- grade.DMACC officials say that enrollment at the Southridge center is already a huge success. The facility will house four academic programs, including a Warren County Career Academy for high school students, custom training for metro area employers and continuing education programs, according to a news release from the college.“We have many more students than we initially anticipated,” said Rick Carpenter, the director of the DMACC Success Center who oversees the college curriculum offered to high school students at Southridge. “We planned for 175 high school students; we’ve enrolled 220. We had to hire two full-time health sciences faculty because we have more than 80 students signed up in our certified nursing assistant program. Our criminal justice program is also full with 60 high school students. We’re thrilled with these numbers.”Dingel said Southridge has diversified a mall that metro area leaders were worried might not survive only a few years ago. “If they were as strong as Jordan Creek, they wouldn’t have need to fill that space, but it’s a different demographic,” Dingel said of the south side property. “I think it was a very smart move to redevelop and reuse that space.”“They’re thinking outside the box to drive traffic to the mall,” Dingel said of Southridge management. “They’ve had to evolve to survive. They’re taking out leasable space to help sustain the mall’s overall health.”

Valley West updated its interior look in 2003 while Jordan Creek Town Center was under construction. Then in 2008, it added Chipotle Mexican Grill and Noodles & Company restaurants with exterior entrances on the west side of the mall. However, Dingel said West Des Moines’ older mall faces strong competition from Merle Hay Mall and Jordan Creek.

The mall in the heart of West Des Moines’ office parks and strip malls has had some updating, mostly in the food service areas, he noted. Mall owners should consider a new façade or something to attract other retailers like H&M clothing or perhaps an open air dining approach like Jordan Creek offers, Dingel suggested. Such changes would mean displacing local tenants because Valley West has little room to add on.

“Valley West struggles a little bit to have a good sit-down restaurant,” he said. “I know how challenging it is. I know what they’ve tried to do.”

Paul Stender, general and leasing manager for Valley West Mall said: “While it is true we do not have a traditional sit-down restaurant, there are many great choices in the immediate area. We do have a number of great dining options, which include our fast-casual restaurants, such as Noodles and Chipotle and our food court. We do have some planned redevelopment opportunities at Valley West Mall, and we hope to capitalize on those opportunities, which will continue to provide our guests with a unique shopping and entertainment experience.”